ASX 200 8,709.3 +0.34%AUD 69.9cBrent US$104.46Gold US$4,333
06 · Financial MarketsClose of 29 September 2026 unless noted

Markets are bracing for rates to stay higher for longer

Bond yields are at 15-year highs around the world, central banks in Australia and the US are both raising rates, and the dollar is stuck just below 70c. Shares are holding up — carried by AI and technology stocks.

Rates & bonds

Long-term borrowing costs are above the cash rate

Australia’s 10-year government bond yield hit 5.16% on 1 September (5.24% at its peak that day), the highest since April 2011. That is above the RBA’s 4.60% cash rate: investors want extra compensation for inflation risk and for the flood of government borrowing worldwide.

Bond yields set the price of fixed-rate mortgages and long-term business loans, so this tightens conditions even without the RBA moving.

Key interest rates, September 2026
Australia 10-year bond5.16%
US 30-year bond5.2%
RBA cash rate4.60%
US Fed funds (upper)4.00%
Japan 10-year bond3.0%
AU 10-year
Highest since Apr 2011
US 30-year
Above 5.2% for the first time in 19 years
Japan 10-year
Highest since September 1996
Mortgage calculator

What the rate rises mean for your repayments

Principal and interest, monthly · illustrative
$600,000
$200k$2m
2.00 pts
1.50 pts3.00 pts
Loan term
Cash rate scenario
Monthly repayment at 4.60% cash rate (6.60% loan rate)
$3,832
vs Aug 2025 low +$387 a month
Total interest $779,503
Repayment under each scenario
Aug 2025 low · 3.60%$3,444
Before 29 Sep · 4.35%$3,733
Now · 4.60%$3,832
One more rise · 4.85%$3,932

Assumes the full cash-rate change is passed on and the loan rate equals the cash rate plus your lender’s margin. Real loan rates vary; this is not financial advice.

ASX 200

Why shares rose on the day rates went up

8,709.3+29.6 (+0.34%)
  1. 01It was expected. Markets had priced the hike, so the decision itself held few surprises.
  2. 02The AI trade. Megaport rallied on almost $1 billion of AI-infrastructure contracts and Codan jumped about 21% to a record $63.
  3. 03Rate-sensitive sectors fell. Utilities, which behave like bonds, dropped as yields stayed high.
Sector moves, 29 September · %
Information technology+4.6
Materials+1.0
Consumer discretionary+0.7
ASX 200+0.34
Energy−0.7
Utilities−0.8
Overnight on Wall Street the S&P 500 fell 0.77% and the Nasdaq 0.92%, so the ASX gain came from local news.
AUD/USD

A “risk-management” hike didn’t lift the dollar

69.9c−0.39%
The dollar on decision day
Before 2:30pm≈70.0cHolding above 70c with the hike fully expected
Decision70.3cA brief rally on the 0.25-point rise
Press conference69.8cGovernor Bullock says more rises may not be needed if inflation eases
Late trade69.9cA firm US dollar on expectations of more Fed rises caps any rebound

How a rate rise travels through markets

The four channels of monetary policy transmission, with what each is showing in 2026.

Lending rates→Variable mortgages and business loans cost more→≈$98 a month more on a $600k loan; home sales down 15.5% on a year ago
Asset prices→Homes and bonds are worth less; households feel poorer→Home values −3.6% since March; saving ratio up to 6.5%
Exchange rate→Higher rates normally lift the dollar, cutting import prices→Weak this year: safe-haven US demand keeps the dollar below 70c
Expectations→Firms and workers expect lower inflation and moderate price and wage rises→The RBA says short-term inflation expectations remain elevated